Strathmore Resources Ltd -
Strathmore Resources Offers Opportunity in the Uranium Sector
Strathmore Resources Ltd SMR
Shares issued 7,754,498 1998-12-04 close $0.36
Monday Dec 7 1998
Gold Ridge Investment Corp. Presents:
Supply Squeeze Developing in the Uranium Markets - Analysts and Investment Bankers Forecasting Prices to Rise 100% in 1999 !!
STRATHMORE RESOURCES LTD. ("SMR" - VSE)
OFFERS INVESTORS UNPRECEDENTED BOTTOM-FISHING OPPORTUNITY IN THE URANIUM SECTOR
STRATHMORE RESOURCES LTD.
Suite 106
1460 Pandosy Street
Kelowna, B.C. V1Y 1P3 Canada
Phone: (250) 868 - 8445 * Fax: (250) 868 - 8493
Toll-Free: (800) 647 - 3303
website: strathuranium.com
Strathmore Resources' management team has acquired an impressive portfolio of uranium properties for approximately US$0.01 per pound of uranium in the ground, compared to a long-term (20+ years) industry average of US$1.68/lb for similar properties (most-recent uranium deal priced at over US$2/lb) !!
CORPORATE BACKGROUND
Strathmore Resources Ltd. ("SMR" on the VSE) was one of the earliest entrants in what is now a crowded junior uranium stock market.
Starting from scratch, SMR has assembled one of the most-experienced management teams in the uranium sector, and, over the last 15 months, has acquired 42.2 million pounds of proven and probable uranium resources at a cost of approximately US$0.01 / lb. In contrast, other uranium companies are paying an average of US$1.68 / lb for similar size and quality deposits!
Many analysts are of the opinion that we are in the early stages of a new multi-year bull market for uranium. Strathmore Resources is positioning itself to take advantage of this opportunity by adopting a strategy which focuses on management expertise and the acquisition of quality deposits for a penny per pound (or less!).
The technical knowledge and uranium industry mining experience which the SMR management team has is rarely found with a junior resource company. These combined management skills have allowed Strathmore Resources to identify, acquire, and to later bring into production the properties which meet their criteria, all at reasonable costs.
CORPORATE FINANCIALS
Shares Issued: 16,972,746 Cash on Hand: Cdn$650,000
Fully-Diluted: 22,285,755 Long Term Debt: Nil
52-week high: Cdn$0.87 52-week low: Cdn$0.16
Current bid/ask: Cdn$0.39 - Cdn$0.43
MANAGEMENT
Despite its small market capitalization, Strathmore Resources has assembled an outstanding management team, composed of individuals who have worked in the uranium industry for several decades, and have successfully built mines and operated profitable public companies. These people are also noted within the uranium industry for their significant technical abilities; this pooled knowledge has allowed Strathmore Resources to quickly and professionally asses and close on new acquisition opportunities, such as the Macusani Uranium District property in Peru.
Ken Friedman (President & CEO) - after earning his Ph. D at MIT, Friedman worked as Metals & Mining Analyst for Boetcher & Co., Natural Resources Analyst for Kemper Securities, and, Director of Research for Dickinson & Co. prior to joining Strathmore Resources in 1996.
David Miller (Chief Geologist) - in a 20-year career with COGEMA, the second-largest uranium producer in the world, Miller served as COGEMA's chief geologist in the United States; he was also manager of in-situ leach operations at the Christensen Ranch project, and has expertise in all aspects of uranium mining, including refractory in-situ leach.
Ray Larson (Chairman, Executive Advisory Board) - the founder of Uranium Resources Corp., and that company's President & CEO from 1977 until his retirement in 1994. During that time, Uranium Resources was the most-successful company in the business, and earned a reputation as a pioneer of in-situ leach technology, an environmentally-friendly, low-cost technology for producing uranium from certain types of deposits.
Bill McKnight (Executive Advisory Board) - Chief Operating Officer (and Ray Larson's right-hand man) of Uranium Resources until his retirement, McKnight has a world-wide reputation as one of the leading experts on in-situ leaching of uranium ores.
Strathmore Resources' management team rivals that of any of the world's major operating uranium companies. With the expertise in place to acquire additional low-cost properties and to bring them to production, SMR's management is fully-capable of maximizing the company's potential during the upcoming uranium bull market.
STRATHMORE RESOURCES' ACQUISITION & GROWTH STRATEGY
Strathmore Resources is a growth-oriented company specializing in the acquisition and development of low-cost uranium properties in the United States.
SMR's corporate strategy has been to target properties amenable to low-cost, in-situ leach or OP/HL production. During this brief window of low uranium prices, SMR has been aggressively evaluating projects and closing deals on deposits that meet the company's criteria.
The key to Strathmore Resources' strategy is that the United States hosts approximately four billion pounds of undeveloped uranium resources. With several decades of U.S. operational experience, SMR management is acutely aware which of these deposits are economic due to advances in uranium mining and processing technologies, and have focused their acquisition program accordingly.
Since September 1997, Strathmore Resources has acquired 16 properties in the western United States previously owned and explored by major oil and mining companies. These properties collectively host proven and probable, drill-indicated resources totaling 42,395,000 pounds of uranium, as well as an additional 95.3 million pounds of possible resources.
Had SMR simply staked and drilled these properties, it is safe to say that they would have spent on the order of US$30 to US$50 million proving up these resources. Instead, they have bought these properties outright for approximately one cent per pound of uranium in the ground!
Strathmore Resources has acquired their U.S. property portfolio (plus technical and exploration data for many of the deposits) for just US$458,500. Only one property has a royalty - a reasonable 2% production payout that is capped at just over US$1 million.
Compared to other uranium companies, Strathmore Resources has been selectively acquiring quality assets at fantastic discounts to fair market values.
Over the past 20 years, there have been 30 acquisitions of uranium reserves and resources made by public companies. The average price paid for a pound of uranium in the ground has been US$1.68, with the most-recent non-SMR transaction being priced at just over US$2 per pound of uranium reserves / resources.
THE AURORA PROPERTY (OREGON - USA)
On February 2, 1998 Strathmore Resources entered into an option to purchase agreement for the 360-acre Aurora property in southeastern Oregon, a large, low-grade, heap-leachable property that had been drilled by Placer Amex. Terms of the option are US$15,000 per year for six plus a 2% royalty capped at US$1.1 million.
Subsequent to closing, Strathmore Resources staked an additional 2700 acres surrounding the Aurora property, containing additional uranium potential.
Aurora hosts a proven, drill-indicated resource of 17 million pounds of uranium, with an additional 40 million pounds of possible resources. The acquisition agreement negotiated by SMR's management team allowed Strathmore Resources to acquire proven uranium resources for less than one cent per pound!
MACUSANI PROJECT (PERU)
In late 1997, the Peruvian Government released the Macusani Mining District from that country's national mineral reserve.
Within two weeks of receiving this notice, SMR management had traveled to Peru, incorporated a Peruvian subsidiary (Peruran S.A.), applied for and was granted 40 square kilometers of concessions in the heart of the district.
Additionally, Strathmore Resources hired Guido Arroyo, formerly the Chief Geologist of the Peruvian Nuclear Institute ("IPEN"), to manage their Peruvian operations.
The International Atomic Energy Agency estimates that the Macusani District hosts between 50 and 140 million pounds of uranium oxide reserves.
What is unique about the Macusani District are the outcroppings of pure autunite, which contains 51% uranium by weight and converts into 60% - 65% U3O8. The uranium is contained in high-grade veins 1 to 3 centimeters wide, and the mineralized areas run for hundreds of meters along the surface. There are also significant tonnages of lower-grade, disseminated mineralization associated with the autunite veins.
Preliminary metallurgical testwork indicated that the pure autunite ores gave 97% leach recoveries, with the lower-grade / disseminates ores showing 55% recoveries in 12 hours. SMR is confident of increasing the disseminated ore recovery rates through longer leach times and further refinements to the processing flow sheet.
Strathmore Resources recently announced that the Company will be shipping a 50 kilogram sample of uranium ore to North America for advanced metallurgical testing to see if the Macusani ores can be enriched directly, thereby bypassing the milling process. Should these tests prove to be successful, SMR could profitably develop the project at current prices.
URANIUM SUPPLY & DEMAND
Nearly all of the uranium currently mined is used for the generation of commercial electricity.
On a world-wide basis, 18% of electricity is generated by nuclear power; this ranges from 35% to 78% within western European countries, to supplying approximately 35% of Korea and Japan's electricity needs. There are 37 nuclear reactors currently under construction, in addition to many others on the drawing boards.
In 1997, mine production of uranium was 74 million pounds; an additional 6.5 million pounds was recovered from reprocessing spent nuclear fuel, and 9 million pounds were imported from Russia / CIS, for a total supply of 89.5 million pounds.
Total western world demand was 120 million pounds, leaving a shortfall of approximately 30 million pounds of uranium.
It is estimated that at the end of 1997 that inventories and stockpiles of uranium were equivalent to approximately one years supply, the lowest level since the mid-1980s, and a prime factor in the growing unease about a supply squeeze occurring in 1999.
Despite a maximum level of de-processing highly enriched weapons-grade uranium for commercial fuel, and despite the maximum recycling of used fuel, nearly every analyst (including the prestigious Uranium Institute of London) expects the supply shortage to persist for the next six to ten years. Even the potential for importing highly-enriched military-grade uranium from Russia and the potential sale of U.S. Government stockpiles would be insufficient to close the supply deficit.
The consensus opinion which has emerged in recent months is for uranium demand to continue to exceed available supplies through at yeast 2005. Under this scenario, economic laws dictate that uranium prices will rise to a sufficient level to enable enough new production to come on line to alleviate the supply shortage and bring inventories back in line.
URANIUM PRICES
As of November 16, 1998 the spot price of U3O8 was US$9.10 per pound.
However, the consensus of industry analysts and investment bankers is for significantly higher prices in 1999.
For example, Bear Stearns is forecasting an average price of US$17.50/lb during 1999. The Uranium Institute of London has released a study documenting average world production costs of over US$20 / lb U3O8, which implies that in the face of stable and growing demand, that uranium prices must rise to these levels in order to avoid significant supply disruptions.
WHY URANIUM PRICES WILL RISE IN 1999 & BEYOND
There are many bullish factors that are quietly coming together which will force uranium prices much higher in 1999 and beyond, including:
(1) Annual consumption (120 million lbs U3O8, increasing to 130 MM lbs by 2002) has outstripped production (70 to 98 million lbs) in recent years, and is forecasted to do so for the foreseeable future
(2) The supply shortfall has been covered by drawing down uranium inventories, with above-ground supplies having fallen from 120 million to 60 million pounds in the past three years. Based on supply-demand projections, the remaining inventories could be exhausted during 1999, leading to a major supply shortage.
(3) Increasingly uncertain supplies from Russia and the former Soviet Republics. Despite tremendous reserves, the increasingly uncertain political and investment climates suggest that future production from this region will be uncertain at best. Notably, the Russian government recently cancelled a major uranium deal with Cameco, COGEMA & Nukem.
(4) Limits on uranium imports into major markets such as Japan, Canada and the United States further discourages producer stockpiling of uranium inventories.
(5) Almost all current production has been pre-sold under long-term contracts; during 1996, utilities tied up over 90% of 1997 uranium production under long-term contracts.
(6) Utility companies are currently signing longer-term (5 to 7 years versus 3 to 5 years) at higher prices in order to secure supplies of uranium. There are unconfirmed reports that recent contracts have set (or exceeded) prices of US$20 / lb U3O8.
With the rapid depletion of above-ground uranium inventories (down to just 60 MM lbs), and the continuing excess of demand (120 - 130 MM lbs) over mine supply (80 - 90 MM lbs), prices have to rise in order to bring the market into balance and allow new mines to profitably be brought on line.
Clearly, the current low prices cannot last for very much longer. The near-certainty of depleting above-ground inventories sometime during 1999 suggests that prices will increase significantly in order to ensure that electric utility needs for uranium will continue to be met.
CORPORATE FINANCES & MARKET SUPPORT
Strathmore Resources currently has about Cdn$650,000 in cash in their treasury. Their most-recent financing raised approximately Cdn$337,500 in September 1998.
The corporate burn rate, including corporate overhead and property payments for United States and Peru, is approximately Cdn$95,000 per month.
Strathmore Resources' last two financings were led by Rick Rule of Global Resource Investments Ltd.
Within the past 18 months, SMR has been recommended by Bob Bishop, David & Eric Coffin (authors of The Hard Rock Mining Analyst), James Dines, Doug Casey and many other well-regarded investment newsletter writers.
OPPORTUNITY FOR INVESTORS
If ever there was a time to bottom-fish the uranium market, this is probably it!
For years, uranium has been largely ignored by the investment community, but now, astute investors are preparing for what many believe will be the strongest run on uranium spot prices since the 1970s. In fact, we could easily see a classic commodity squeeze developing for uranium supplies, driving prices significantly higher in the near-term. The only real question is why so few people fail to heed these clear warning signs, missing the chance to load up on good stocks at bargain basement prices and instead only come on board after the party has started and prices are up significantly.
Many analysts are encouraging clients to take positions in the few publicly-traded uranium companies available to investors. In fact, Strathmore Resources has been recommended by numerous investor newsletters over the past two years.
These strong endorsements are due to the solid market fundamentals which represent a classic commodity squeeze, whereby demand is quickly depleting inventories and the supply is in a significant shortfall position.
Strathmore Resources has excellent technical management, strong financial backing, solid growth prospects, and should do very well in the future.
From a technical standpoint, we believe that has SMR turned the corner, breaking out of its downtrend line with bottom-fishers once again taking positions.
Currently the company is trading at Cdn$0.42 cents (US$0.28) per share.
With increased market and investor awareness, it seems reasonable to expect that SMR's uranium resources will be valued at comparable levels to its peers - somewhere on the order of US$1 to US$2 per pound of uranium in the ground.
Strathmore Resources has all of the ingredients for success: expert management, several excellent properties at different stages of development, plenty of cash, and the backing of some very powerful market gurus. A run in the price of uranium like we all expect would reward shareholders with large capital gains, and make SMR a prime takeover target.
For more information, please contact:
Toll-Free: (800) 647 - 3303
Bob Hemmerling (Investor Relations)
DISCLAIMER
This is not an offer to sell any securities of Strathmore Resources Ltd. ("Strathmore Resources"). The securities may only be offered by registered broker-dealers which may have agreed to market Strathmore Resources' securities. Gold Ridge Investment Corp. ("Gold Ridge") is not such a registered broker-dealer.
The information contained herein has been provided by Strathmore Resources to Gold Ridge for information purposes only and should not be construed as, and shall not form part of an offer or solicitation to buy or sell any securities nor should it be construed as investment advise. In addition, the information contained in this report is not intended to be a complete discussion of information regarding some of the current and/or intended business activities. Gold Ridge has not conducted any due diligence into the company or into any of the representations contained in this report.
The information contained herein has been compiled or derived from sources believed reliable and contains information and opinions which are believed to be accurate and complete. However, Gold Ridge makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use or reliance upon this report or its contents.
Gold Ridge has received US$20,000 cash from Strathmore Resources' as consideration for the preparation and advertisement of this report, and, prior to Gold Ridge disseminating this information, Strathmore Resources has reviewed and approved the contents hereof.
Website: strathuranium.com
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
MM
|
